Question 1

11.3 The Final Equilibrium
Refer to the information provided in Figure 11.6 below to answer the questions that follow.  Figure 11.6
-Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably

Accepted Answer

A)  increase both the equilibrium output and the price level. 
B)  decrease the equilibrium output and increase the price level. 
C)  increase the equilibrium output and decrease the price level. 
D)  decrease both the equilibrium output and the price level.

Question 2

Refer to the information provided in Figure 11.5 below to answer the questions that follow.  Figure 11.5
-Refer to Figure 11.5. An increase in the Z factors shifts the ________ to the ________.

Accepted Answer

A)  Fed rule; left 
B)  Fed rule; right 
C)  IS curve; left 
D)  IS curve; right

Question 3

A decrease in the "Z" factors shifts the Fed rule to the right.

Accepted Answer

A) True 
 B)False

Question 4

Other things equal, a decrease in government spending ________ the equilibrium interest rate and ________ equilibrium output.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 5

The real wealth effect explains why the aggregate supply curve is horizontal in the long run.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the information provided in Figure 11.8 below to answer the questions that follow.  Figure 11.8
-Refer to Figure 11.8. Suppose the economy is currently at Point A producing potential output Y0. If the government increases spending, the economy moves to Point ________ in the short-run and to Point ________ in the long-run.

Accepted Answer

A)  D; E 
B)  B; C 
C)  C; B 
D)  B; D

Question 7

________ shifts the Fed rule to the right.

Accepted Answer

A)  An increase in government spending 
B)  A decrease in government spending 
C)  An increase in the price level 
D)  A decrease in the Z factors

Question 8

Related to the Economics in Practice on p. 221: In January 2014, a new Chair of the Board of Governors of the Federal Reserve System was confirmed. This person is

Accepted Answer

A)  the first Democrat to serve in this position. 
B)  the first woman to serve in this position. 
C)  the first person to serve in this position who had never previously been employed in the Federal Reserve System. 
D)  all of the above

Question 9

The aggregate supply curve is probably better thought of as a price/output response curve.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the information provided in Figure 11.2 below to answer the questions that follow.  Figure 11.2
-Refer to Figure 11.2. At $900 billion, this economy

Accepted Answer

A)  is producing below its capacity. 
B)  is above its production capacity. 
C)  reaches its capacity. 
D)  any of the above can be correct

Question 11

As the interest rate decreases, the planned aggregate expenditure curve shifts downward.

Accepted Answer

A) True 
 B)False

Question 12

Refer to the information provided in Figure 11.5 below to answer the questions that follow.  Figure 11.5
-Refer to Figure 11.5. A decrease in the Z factors shifts the ________ to the ________.

Accepted Answer

A)  Fed rule; left 
B)  Fed rule; right 
C)  IS curve; left 
D)  IS curve; right

Question 13

Refer to the information provided in Figure 11.4 below to answer the questions that follow.  Figure 11.4
-Refer to Figure 11.4. Suppose the economy is at Point A, an increase in aggregate demand moves the economy to Point

Accepted Answer

A)  E. 
B)  B. 
C)  C. 
D)  D.

Question 14

11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow.  Figure 11.7
-Refer to Figure 11.7. $700 million is the level of aggregate output that can be sustained in the long run

Accepted Answer

A)  without inflation. 
B)  only with inflation. 
C)  only with deflation. 
D)  only with unemployment.

Question 15

A decrease in government spending shifts aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 16

The aggregate demand curve is the sum of all market demand curves in the economy.

Accepted Answer

A) True 
 B)False

Question 17

Related to the Economics in Practice on p. 227: In the simple "Keynesian" view, if planned aggregate expenditure and aggregate demand exceed capacity output, there is

Accepted Answer

A)  an inflationary gap and price level rises. 
B)  an inflationary gap and price level falls. 
C)  a recessionary gap and price level rises. 
D)  a recessionary gap and price level falls.

Question 18

An increase in aggregate demand when the economy is operating at ________ is likely to result in an increase in the overall price level and ________ in output.

Accepted Answer

A)  high levels of output; a large increase 
B)  high levels of output; little or no increase 
C)  low levels of output; a decrease 
D)  low levels of output; no change

Question 19

Refer to the information provided in Figure 11.1 below to answer the questions that follow.  Figure 11.1
-Refer to Figure 11.1. This economy is most likely experiencing excess capacity at aggregate output levels

Accepted Answer

A)  above $1,500 billion. 
B)  between $1,000 billion and $1,500 billion. 
C)  between $500 billion and $1,000 billion. 
D)  below $500 billion.

Question 20

When the interest rate is low, planned investment is ________ so output is ________.

Accepted Answer

A)  high; high 
B)  high; low 
C)  low; high 
D)  low; low

Exam 11: The Determination of Aggregate Output, the Price Level, and the Interest Rate

11.3 The Final Equilibrium Refer to the information provided in Figure 11.6 below to answer the questions that follow. Figure 11.6 -Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. An increase in the Z factors shifts the to the .

A decrease in the "Z" factors shifts the Fed rule to the right.

Other things equal, a decrease in government spending the equilibrium interest rate and equilibrium output.

The real wealth effect explains why the aggregate supply curve is horizontal in the long run.

________ shifts the Fed rule to the right.

Related to the Economics in Practice on p. 221: In January 2014, a new Chair of the Board of Governors of the Federal Reserve System was confirmed. This person is

The aggregate supply curve is probably better thought of as a price/output response curve.

Refer to the information provided in Figure 11.2 below to answer the questions that follow. Figure 11.2 -Refer to Figure 11.2. At $900 billion, this economy

As the interest rate decreases, the planned aggregate expenditure curve shifts downward.

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in the Z factors shifts the to the .

Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Suppose the economy is at Point A, an increase in aggregate demand moves the economy to Point

11.5 The Long-Run AS Curve Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7. $700 million is the level of aggregate output that can be sustained in the long run

A decrease in government spending shifts aggregate demand to the left.

The aggregate demand curve is the sum of all market demand curves in the economy.

Related to the Economics in Practice on p. 227: In the simple "Keynesian" view, if planned aggregate expenditure and aggregate demand exceed capacity output, there is

An increase in aggregate demand when the economy is operating at is likely to result in an increase in the overall price level and in output.

Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1 -Refer to Figure 11.1. This economy is most likely experiencing excess capacity at aggregate output levels

When the interest rate is low, planned investment is so output is .

Exam 11: The Determination of Aggregate Output, the Price Level, and the Interest Rate

11.3 The Final Equilibrium Refer to the information provided in Figure 11.6 below to answer the questions that follow. Figure 11.6 -Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. An increase in the Z factors shifts the ________ to the ________.

A decrease in the "Z" factors shifts the Fed rule to the right.

Other things equal, a decrease in government spending ________ the equilibrium interest rate and ________ equilibrium output.

The real wealth effect explains why the aggregate supply curve is horizontal in the long run.

________ shifts the Fed rule to the right.

Related to the Economics in Practice on p. 221: In January 2014, a new Chair of the Board of Governors of the Federal Reserve System was confirmed. This person is

The aggregate supply curve is probably better thought of as a price/output response curve.

Refer to the information provided in Figure 11.2 below to answer the questions that follow. Figure 11.2 -Refer to Figure 11.2. At $900 billion, this economy

As the interest rate decreases, the planned aggregate expenditure curve shifts downward.

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in the Z factors shifts the ________ to the ________.

Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Suppose the economy is at Point A, an increase in aggregate demand moves the economy to Point

11.5 The Long-Run AS Curve Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7. $700 million is the level of aggregate output that can be sustained in the long run

A decrease in government spending shifts aggregate demand to the left.

The aggregate demand curve is the sum of all market demand curves in the economy.

Related to the Economics in Practice on p. 227: In the simple "Keynesian" view, if planned aggregate expenditure and aggregate demand exceed capacity output, there is

An increase in aggregate demand when the economy is operating at ________ is likely to result in an increase in the overall price level and ________ in output.

Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1 -Refer to Figure 11.1. This economy is most likely experiencing excess capacity at aggregate output levels

When the interest rate is low, planned investment is ________ so output is ________.

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. An increase in the Z factors shifts the to the .

Other things equal, a decrease in government spending the equilibrium interest rate and equilibrium output.

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in the Z factors shifts the to the .

An increase in aggregate demand when the economy is operating at is likely to result in an increase in the overall price level and in output.

When the interest rate is low, planned investment is so output is .